Among the important roles of Bank Indonesia was to safeguard and stabilize exchange rate value of Rupiah against other currencies especially the USD. In this case the focus of effort was on stabilizing exchange rate value not on strengthening the value. As known extreme weakening or strengthening of currency value was undesirable to the nation’s economy.
It seemed reasonable that when Rupiah got over-volatile or over fluctuative, players of economy would panic; they were expecting Bank Indonesia to immediately take action to neutralize the market and bring back Rupiah stability. The same was expected by players of economy today as pressure on Rupiah mounted, especially due to external pressures like the crisis in Europe.
Continual weakening of Rupiah over year end had actually kept BI busy. Market intervention by monetary authorities seemed not so satisfactory, apparently BI had not been successful in taking Rupiah out of the depth in spite of massive effort by BI to throw vast amount of USD to the market which drained Indonesia’s forex reserves.
Understandable because BI’s intervention at the moneymarket last May had washed out at least USD 2 to 3 billion. The result was unsatisfactory because Rupiah refused to budge significantly. It strengthened for a while, but sank again dramatically.
As guardian of Rupiah, BI did not have much choice but to make market intervention. Although guardians of the Central Bank stated that they had several options to protect Rupiah, but intervention was still the only reliable and effective means to stabilize Rupiah value against USD.
All in all, forex reserves could not be maintained to be plentiful. Indonesia’s forex reserves by end of May 2012 dropped significantly compared to April 2012. Not less than USD 4.9 billion of Indonesia’s forex reserves had to be released in May 2012. Normally forex reserves showed a trend of up and down all through the year, but lately fast downturning was inevitable due to BI’s intervention.
Indonesia’s forex reserves in 2012 was on January posted at USD 112 billion, February USD 112 billion, March USD 110,49 billion, April USD 116.4 billion, while in May was posted at USD 111,53 billion.
Analysts, economists and market players believed that BI must interfere the market players believed that BI must interfere the market to prevent Rupiah from sinking any deeper. Unfortunately intervention was never effective to bring Rupiah up to below Rp 9,000,- Rp 9,300 per USD due to the forceful negative sentiment of the global market.
BI’s aggressiveness in controlling Rupiah was out powered by the impact of Europe’s crisis which triggered dong anxiety. So strengthening of Rupiah toward long anxiety. So strengthening of Rupiah toward stabilization remained to be BI’s task today although the cost for it was not small. Let there be no misinterpretation, whatever the cost to stabilize Rupiah it had nothing to do with appraisal of BI’s performance because to stabilize Rupiah value was of paramount importance; the cost might be over ruled as of secondary importance. Certainly BI would not act carelessly to protect the moneymarket from speculators.
All stakeholders should just as optimistic and believe that whatever extent BI would stay strong to uphold Rupiah. This was because BI had exercised term deposits policy for foreign currency in accordance with market mechanism.
Bi had also run the policy to make it mandatory for national exporters to place their proceed from export revenues forex (DHE) to national Bank accounts instead of foreign banks abroad. This new BI policy should have been put in effect early June last. It was believed that BI’s policy would strengthen USD liquidity at home in Indonesia to fulful market demand.
Even if the crisis in Europe continued and influenced Rupiah value, BI still had the energy to uphold Rupiah. Stakeholders were pled not to be skeptical not to mention apathetic about the magnitude of BI’s fund to stabilize Rupiah. The position of forex reserves was still sufficient for taking action in case Rupiah suddenly nose dived.
Intervention by BI must be continued, not to fight against the market which was tremendously big, but to signal to stakeholders that BI was always standing by at the market. When BI supported Rupiah, domestic investors would be at ease and unrest in the domestic moneymarket could be prevented.
Business News - June 15, 2012